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Indonesia Could Save Nearly $4T by Achieving Net Zero Emissions by 2050

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Indonesia Could Save Nearly $4T by Achieving Net Zero Emissions by 2050

Jakarta, Timerilis.com – Indonesia could save $3.8T in investment and peak carbon emissions three years sooner if it achieved net-zero emissions by 2050, instead of 2060 as targeted by the government. These findings refer to the report of the High-Level Policy Commission on Getting Asia to Net Zero organized by the Asia Society Policy Institute.

The latest report, Getting Indonesia to Net Zero, examines the costs, benefits, and impacts of Indonesia’s choice to implement its official strategy to reach net zero emissions by 2060. The report explores a scenario in which Indonesia increases its ambition to exit coal-fired generation as early as 2040 and reach net zero emissions by 2050.

According to Asia Society President and former Australian Prime Minister Kevin Rudd, the report shows the transition to net-zero emissions not only addresses the climate crisis but also offers significant economic opportunities for Indonesia.

“By prioritizing solar and wind power and investing in new technologies, Indonesia can create new jobs, improve its trade balance and drive economic growth. This report provides a roadmap for Indonesia to realize the benefits of the transition,” Rudd said.

In 2021, the Indonesian government announced a goal to reach net zero emissions by 2060. New modeling in this report shows that if Indonesia achieves its 2060 emissions target, it will require $5T in investment and lead to peak emissions as early as 2030. Indonesia’s GDP increases in the medium term by 5% by 2032, creates up to two million new jobs by 2039, and improve its trade balance by $48B.

However, if Indonesia implements a more ambitious decarbonization policy sooner, the investment required could be significantly reduced. Bringing forward the net zero emissions target to 2050 while phasing out coal power subsidies could reduce the required economic investment to $3T while boosting GDP to 5.3% above the 2031 baseline.

Doing so while also prioritizing low-cost renewables like solar and wind could reduce investment costs by $1.2T, and allow emissions to peak even sooner, in 2027.

“As host of the G20 in 2022, Indonesia emphasizes the importance of a green recovery and clean energy transition globally. Indonesia’s leaders can use the country’s own domestic experience to illustrate how green growth can drive economic development and improve welfare, which can set an important example for other developing countries in Asia.” Rudd explained.

In the latter scenario, the adverse impact of a net zero transition on household spending could also be halved. While the 2060 plan could lead to a $189B drop in household spending due to higher prices and inflation, implementing the 2050 plan with a stronger focus on solar and wind could further reduce spending to just $63B.

Former Indonesian Finance Minister Muhamad Chatib Basri highlighted the importance of measures to support vulnerable groups, such as repurposing fossil fuel subsidies, shifting incentives from unclean to renewable sectors, and accelerating the implementation of carbon taxes.

“The government can use it to help vulnerable populations cope with the rising cost of living. Government social programs can provide income support and retrain fossil fuel workers to take advantage of opportunities in the low-carbon economy.” Chatib said.

The report offers three main recommendations for Indonesian policymakers to consider.

First, officials can focus on policy measures that capitalize on Indonesia’s energy transition to deliver tangible benefits to local households.

Second, the government can prioritize lower-cost renewable energy, particularly solar and wind power. Third, governments can invest in the development of green industries and jobs.

Former UN Secretary-General and President and Chair of the Global Green Growth Institute Ban Ki-moon said the Indonesian Government can also send a strong signal of its commitment to net zero by ensuring that major new industrial projects are truly ‘green’.

Launched in May 2022, the High-Level Policy Commission on Getting Asia to Net Zero brings together diverse Asian and global leaders to urgently accelerate Asia’s transition to net zero emissions. (Eva/Rd)